manideep vulli
Nov 4 · 1 min read

Economic myopia:

Ramu earns a salary of 1000 and one fine day he got to know that his salary is increased to 1050,he was very happy that his earnings are increased and he can buy some new things for his comforts.

But,
did he really increase his earnings?
can he buy his new things which he wanted?

let us analyse:

His earnings are increased from 1000 to 1050 which means he has a 5 percent increase in his salary

Some important terms:

Inflation:

inflation is a situation of a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise.

On simple terms inflation is "rise in prices"

Purchasing power:

Purchasing power is the amount of goods and services that can be purchased with a unit of currency.

Now coming back,let us suppose the inflation stood at 6%

I.e the goods which costed 1000 rupees now costs 1060 rupees.

Now Ramu got 1000 rupees previously and he got his neccesities with that 1000

But now his salary is increased to 1050

But the goods which he used to buy costed 1060

Hence he was not able to buy his needs!

So now did ramu's earnings really increased?

Lessons:
1.What you see is not what actually it is!
2. Inflation is a serious phenomenon,protect your self from it.

    manideep vulli

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